One of the ways real estate investors find undervalued property is to source homes that have a foreclosure notice filed. Or prior to a foreclosure notice, a Notice of Default is file, a document that tells the property owner that unless the mortgage isforeclosure options for the owner not brought current then a foreclosure will be filed. Either way, the owner is in need of some serious assistance.

Owners facing foreclosure are a combination of fear and a touch of embarrassment. While an individual’s credit report is private, a foreclosure filing is a public record for all to see. What are some of the options you can provide a distressed seller? That depends upon the stage of the foreclosure.

If a foreclosure notice is already filed, the lender can provide the owner with an amount needed to bring the loan current. Once the loan brought current, it’s called a “Reinstatement.” This is typically not an option as the owner didn’t have the money to pay the mortgage in the first place.

Lenders may also construct a repayment plan based upon the outstanding loan balance and the owner’s monthly income and expenses. A lender can interview the owner and find out how much income is brought home each month compared with monthly expenses including everything from food to car payments to dry cleaning bills. If there is any money left over, the lender can figure out a plan to repay the amount due over the next several months.

A loan modification takes the repayment plan a bit further and reviews the owner’s entire financial situation and arrives at a newly modified loan with a lower interest rate. A modification does require the owner have sufficient income to make the new, lower payments. If the interest rate can’t be lowered to a payment the owner can afford, a modification won’t be the answer.

If the owner’s mortgage is greater than the value of the property, then a short sale is in order. A bank can accept less than what is owed on the property when a buyer makes an offer. The bank can agree to a short sale if it feels the current owner is not likely to bring the loan current and avoid a foreclosure.

Finally, the owner can sell the property to a cash buyer that will quickly close on the transaction and avoid a foreclosure altogether. This is the ideal option, given sufficient equity as the owner gets out from under the loan, takes home some cash and the investor gets a property at below market value.